Answer:
The crowding out effect refers to the decrease in investment from an increase in the government's budget deficit.
Step-by-step explanation:
The crowding-out effect refers to an expansionary fiscal policy or an increase in government spending that result in an offsetting falls in spending in the private sector.
The increase in government spending is usually inanced by government borrowing from the public and this sometimes bring about an increase in interest rate that dicourages investors from borrowing and therefore causes a fall in the spending by investors.
Therefore, crowding out effect is a situation whereby government hijacked fund that is supposed to be used by investors and the eventual result will be an increase in the government's budget deficit and decrease in investment.
Therefore, the crowding out effect refers to the decrease in investment from an increase in the government's budget deficit.